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SOUTHEAST SNAPSHOT, APRIL 2005
Greensboro Industrial Market
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Bobby Finch
Partner
Triad Commercial Properties
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Throughout the Greensboro, North Carolina, industrial sector, the most prevalent market trend has been larger companies seeking big blocks of distribution space. In most cases, these users need more than 300,000 square feet, including properties with higher ceilings and expandability. For example, Dell Inc. has developed plans for a 527,000-square-foot manufacturing facility in Winston-Salem. The property is scheduled to open in the fourth quarter, and resulting from the construction of this project, as well as in support of it, eight to 12 Dell vendors and suppliers are expected to open in the local Triad (Greensboro/Winston-Salem) area. The plan calls for each new location to be within 90 minutes of the manufacturing facility in order to support Dell’s “just in time” delivery model. FedEx is another major industrial tenant planning a large development in the Greensboro area. The company is still on schedule to open its new hub in 2009, and several major aspects of the project have already broken ground and are under construction, including the runway and other infrastructure.
As far as new development is concerned, industrial developers are actively seeking sites in several corridors. Since the trends are leaning toward bigger companies aiming to obtain larger properties that inevitably will utilize more land area and square footage, developers are mainly constructing new projects in three sub-regions in the Triad area: the area surrounding Winston-Salem’s Union Cross Business Park, which is an approximately 400-acre site ripe for industrial development; various submarket sites near the Greensboro Airport; and the 35-mile stretch of Interstate 40/85 between Hillsborough and Greensboro, mostly in Rock Creek Center and North Carolina Industrial Center. The obviously attractive point about these properties is that they all contain plenty of vacant, undeveloped space, therefore drawing an increased amount of construction projects.
New developers have been attracted to the area as well, bringing diversity to the established market. Johnson Development has broken ground on two new buildings that will be completed this year less than 2 miles from the Dell facility. Construction for Johnson’s two-building, 415,000-square-foot project was taking place on two different sites as of March. In addition, an unnamed real estate investment trust presently is quoting on several build-to-suit developments, and another REIT may be seriously considering a portfolio acquisition.
The Triad region certainly is experiencing a fair amount of action in the industrial submarket, as the area’s property management is attempting to attract a wide variety of tenants, ranging from distribution companies to assembly plants as well as light manufacturing and research projects. Since the trends are leaning toward developing large blocks of industrial space, many local companies are seeking to establish short-term leases as sort of a transition while they construct additions and improvements to the properties that they already own.
In a similar vein, recognizing local leasing trends, the Greensboro/Triad area’s industrial sector recently has seen several large lease transactions. Sara Lee Corporation continually has been leasing large blocks of industrial space on a month-to-month basis; furthermore, two major leases have been closed in recent months. Lowe’s Home Improvement Warehouse has leased an approximately 450,000-square-foot space at 7220 U.S. Highway 158 in Stokesdale, North Carolina. The site is located 10 miles north of the Greensboro airport, and Lowe’s has entered into a 5-year lease on the grounds of a former Burlington Industries facility. At 615 Pegg Rd., also located within the airport submarket, Berco, S.p.A. has leased approximately 122,000 square feet.
Rental rates are roughly $2.75 to $3.25 per square foot, and many reports regarding vacancy rates have included functionally obsolete buildings, so the data is inconclusive at this time.
In the future, the Highway 311 corridor appears that it will see increased development, and the I-40/85 corridor as well as the airport submarket will continue to see improvements and expansion, mainly due to the recent occupation of space by Dell and FedEx. The new projects by these companies will certainly harbor and catalyze other construction developments in the Triad region, continuing to give the industrial market trends a positive outlook.
— Bobby Finch, partner, Triad Commercial Properties
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